SINGAPORE — In another move to raise standards on sustainability reporting here, the Singapore Exchange (SGX) has made it mandatory for all listed companies to report their environmental, social and governance practices from the financial year ending Dec 31, 2017 onwards.

The announcement yesterday came less than a month after the bourse launched four new indices based on sustainability measurements, offering investors a transparent way to assess such practices among listed companies here. SGX said it received strong support to introduce mandatory sustainability reporting during its public consultation in January, adding it will allow the close to 800 mainboard and Catalist primary-listed companies up to 12 months — instead of the proposed five months — from the end of the financial year to publish their first reports. This would be especially helpful to smaller companies new to sustainability reporting, noted SGX Special Adviser Yeo Lian Sim.
“For small companies, they are usually in fewer locations,” said Ms Yeo. “They may, in fact, be in one location as opposed to larger companies that may cross many borders and have many products. So, the cost and the scale of work is different — we have to recognise that. Second, it doesn’t mean that small companies are not managing their risks,” she continued. “They already are. What we are asking the companies is to go a little further, write down clearly what are the risks they are managing and what are the opportunities they see.

“So, we believe this is relevant to both large and small companies ... For the market as a whole, I believe this increases the transparency ... We have always stood for good governance and this is one more instance in which we want to demonstrate that governance and the transparency.”

The report, done on a “comply or explain” basis, must include a board statement to describe the company’s sustainability actions, identify environmental, social and governance factors that affect business strategies, explain their practices and performances, and set targets.

This practice is a step up from the voluntary sustainability reporting regime that has been in place since 2011. As of end-2013, only about 160 out of 537 mainboard-listed companies filed these reports voluntarily, a joint study by the Singapore Compact for Corporate Social Responsibility and National University of Singapore Business School found.

SGX said it will invite company CEOs to a briefing for clarity and understanding of the new requirements, as well as organise training for all listed companies to build up their reporting capability. Other efforts include working with Global Compact Network Singapore to organise training workshops by sustainability reporting consultants, as well as developing an online portal. Details of these initiatives will be announced later, said the exchange.

Bourses around the world, such as those in Europe, the United States and Hong Kong have already adopted mandatory sustainability reporting, well ahead of Singapore, as investors increasingly focus on such issues when making their investment decisions. SGX’s own survey of institutional investors in June last year found that more than 90 per cent of respondents consider environmental, social and governance factors when investing.

Mr Loh Boon Chye, CEO of SGX, said: “SGX supports our listed companies’ efforts to meet the growing interest in sustainability from shareholders and potential investors worldwide. The annual reporting of non-financial information will enhance the visibility of SGX-listed companies among investors who seek sustainable investment and want to review a company’s environmental, social and governance efforts.”

Singapore-listed companies will have to publish a sustainability report at least once a year, no later than five months after the end of each financial year, covering five primary components: material ESG factors; policies, practices and performance; targets; sustainability reporting framework; and their Board statement.

The new requirements take effect for any financial year ending on or after Dec 31, 2017. For the first year, firms will be given up to 12 months from the end of the financial year to publish their report.

If a company excludes a primary component, it must describe what it does instead, and its reasons for doing so.

To help firms cope with new requirements, SGX will organise training workshops by
sustainability reporting consultants. The bourse is also planning other initiatives, including an online portal.

SGX CEO Loh Boon Chye said: “SGX supports our listed companies’ efforts to meet the growing interest in sustainability from shareholders and potential investors worldwide. The annual reporting of non-financial information will enhance the visibility of SGX-listed companies among investors who seek sustainable investment and want to review a company’s environmental, social and governance (ESG) efforts.”

FOCUS ON PREPARING SUSTAINABILITY REPORT: SMCCA

In a statement to the media on Monday, the Small and Middle Capitalisation Companies Association (SMCCA) said it "welcomes SGX's Sustainability Reporting Guide". It also noted that SGX has "softened many requirements ... in view of reducing anxiety to small- and middle-capitalisation companies when implementing this report".

The association urged companies not to worry about how to satisfy the new requirements, but to focus on "how to differentiate themselves in the eyes of stakeholders through making this report unique and useful".

"SMCCA highlights that the five components in the guide are not overwhelming to implement and provide sufficient flexibility to allow companies to customise and differentiate themselves if they put sufficient effort into working on this initiative," the association said.

"SMCCA also noted SGX has also given companies 12 months from their financial year end to publish their sustainability report in their first year of reporting. This is more than the seven months suggested by SMCCA in its feedback."

The association added that it has identified a consultant who has completed sustainability reports for Singapore-listed companies to provide such services.

"SMCCA will work with these consultants to monitor progress of preparing the report and provide feedback to SGX on difficulties and challenges periodically. SMCCA is also working on identifying more parties and consultants to work with to help companies on implementing the report," it said.

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